Employer Action Considerations While certainly not universal, the trend among employers is to not adopt most of these offerings due to the potential adverse selection, the complexity involved in administration and communication, the short-term nature of the offerings, and the relatively minimal perceived opportunity for meaningful impact.
FSA Grace Period Extension
Overview FSA plans with a grace period provision may be amended to permit employees to use amounts remaining in their health FSA or Dependent Care FSA for eligible expenses incurred up to December 31, 2020. Similarly, off-calendar year plans may be amended to permit employees to use amounts remaining in their health FSA or Dependent Care FSA for eligible expenses incurred up to December 31, 2020. Timing This applies for any plan year or grace period ending in 2020. For example, for a calendar year plan ending December 31, 2019 that has a grace period allowing expenses to be incurred through March 15, 2020, the deadline for incurring expenses could be extended until December 31, 2020. An off-calendar year plan ending on June 30, 2020 may allow expenses to be incurred until December 31, 2020. Impact on HSA Contributions The notice cautions that if the period for incurring claims under a general-purpose health FSA is extended, individuals with unused balances will not be eligible to contribute to an HSA during the extended period. Employer Choice The grace period extension is not mandatory. Employers may elect to adopt it, not adopt it, or adopt it for a shorter period of time. Employers should consider the administrative and communication complexities of adopting this change as a plan year cannot be “closed out” until all potential claims are submitted. Employer Action Considerations This option only applies to employers whose plans include the Grace Period provision (not the rollover/carryover provision) or whose plan year ends in 2020. Generally, employers are not flocking to adopt this offering because of the minimal impact and high administration factor (primarily because plans cannot be closed out until after the grace period has expired).
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